What Technology Is Needed to Survive a Recession?

In good times and bad, retail technology occupies an important place in any food retailer's business. But in the harsh economic climate of the past year, technology plays an even more crucial role in supermarket operations.

One reason for this is uncertainty. During a recession customer demand becomes far less predictable, making it much harder for retailers to know how much inventory and labor they are going to need and how to price their merchandise. Therefore, retailers need analytical tools that can help them make the best possible decisions.

Another factor is vulnerability. With so much turbulence in the marketplace, retailers are more vulnerable to losing shoppers keen on finding the best deals wherever they may be. There is also a heightened risk of theft and operational loss. Again, technology can help to mitigate these potential hazards.

On the other hand, technology is a major capital investment, especially during lean sales periods. Never among the biggest of technology spenders, food retailers need to be especially prudent about their investments these days.

Which leads to the question: Given their limited resources, what are the technologies that retailers should favor during a period of economic uncertainty and vulnerability? What are the must-have applications retailers need to survive these times?

In this week's Technology section, I profiled five applications that seem to me to be essential weapons in any retailer's arsenal, especially in a downturn: labor management, loyalty, price optimization, business intelligence and loss prevention. These selections are certainly up for debate, and I welcome your input on whether they are worthy of being considered must-have. It should be added that these are endorsements of applications, not of particular vendors, including those mentioned in the profiles.

Many retailers already employ these applications, particularly labor management, loyalty and loss prevention. But as the profiles point out, some retailers have decided that the times call for more proactive use of these technologies, whether through upgrades to more advanced systems or a more creative spin on a tried-and-true process.

Price optimization and business intelligence are less commonly adopted applications, though interest in both is rising, not just among large chains but small and mid-tier companies as well. Writing about business intelligence in a recent newsletter, Brian Kilcourse, managing partner, Retail Systems Research, observed, “Mid-tier retailers in particular, who have not historically perceived a need for sophistication, have seen the need for change.”

It's impressive — and instructive — that the retailers that I reference, such as Price Chopper for labor management, Giant Eagle for loyalty, PCC Natural Markets for price optimization, Spartan Stores for business intelligence and Raley's for loss prevention, were willing to make significant investments in technology despite the difficult economy.

Obviously, the paybacks from these systems must be sufficiently strong and rapid to reassure top management, buttressing the argument for the “must-have” nature of these technologies.